It’s too soon to say where the federal investigation into CDR Financial Products — which led to Bill Richardson’s withdrawal this weekend as Barack Obama’s nominee for Commerce Secretary — might be heading.
The probe is focused on how the company — whose founder gave at least $100,000 in political contributions to the New Mexico governor’s political action committees — won two 2004 financial consulting contracts with the state, worth about $1.4 million. No real evidence has yet emerged that Richardson himself is currently a target of the investigation, but his abrupt decision to take himself out of the running for the Commerce post — and his refusal to say, at a press conference this afternoon, whether he had hired a lawyer in connection with the investigation — suggest the story won’t soon go away.
So it’s worth noting that CDR and its founder David Rubin don’t exactly have a squeaky clean record.
Even the firm’s name isn’t what it seems. A 2006 Bloomberg report notes:
David Rubin, whose firm, CDR Financial Products, is entangled in investigations by the Internal Revenue Service, used to call his company Chambers, Dunhill, Rubin & Co. He says he picked those names because he liked the sound of them together. Chambers and Dunhill didn’t exist.
More seriously, that same story reported:
CDR, which has advised local governments on more than $17 billion of derivatives since 2003, is being investigated by the IRS for possibly profiting from deals at the expense of U.S. taxpayers. According to IRS letters obtained from the cities of Atlanta and Fargo, North Dakota, and an internal memo from the state of Wisconsin, CDR may have colluded with Bank of America Corp., Bear Stearns Cos. and other companies to make improper fees by selling municipalities unneeded contracts or mispricing investment deals.
The company’s offices were searched as part of that investigation, which is ongoing, Bloomberg reports today. The probe is looking at whether banks and advisers conspired to overcharge local governments on financing deals.
The firm was also a player in a federal corruption probe focused on the administration of then-Philadelphia mayor John Street.
Bloomberg provides the details:
In April 2001, CDR hired Ron White, a bond lawyer and chief fundraiser for Philadelphia Mayor John Street, as a consultant, paying him a $5,000 retainer to help the company win business with the city. Rubin donated $15,000 to Street between December 2000 and June 2003, according to Pennsylvania state filings.
In addition, CDR gave White three tickets to the 2003 Super Bowl in San Diego and provided a limo ride to the game. White brought along Philadelphia treasurer Corey Kemp, according to a federal criminal indictment brought against White and Kemp in 2004.
On Feb. 11, 16 days after the game, Kemp told White that city Finance Director Janice Davis agreed to “move fast forward” on a $150,000 swap advisory contract for CDR, according to transcripts of FBI wiretaps.
Banks paid CDR, which wasn’t accused of wrongdoing, at least $515,000 from profits they earned on transactions with the city, documents show.
CDR won its contract with the city without a competitive bidding process.
None of this, of course, means that either CDR or Richardson are guilty of any wrong-doing here. But at a minimum, we don’t figure to have heard the last of this…